What Happened?
Shares of internet, cable TV, and phone provider Cable One (NYSE: CABO) fell 6.2% in the afternoon session after its third-quarter report showed a significant loss of broadband subscribers and revenue that missed Wall Street's expectations, overshadowing a large earnings beat.
The company's revenue for the quarter was $376 million, a 4.5% decline from the previous year and short of analyst forecasts. While its profit of $14.52 per share was nearly double what analysts had anticipated, investors focused on the negative trends in customer growth. Cable One lost 149,100 residential data subscribers year-over-year, a key metric for the internet and cable provider. This steep decline in its customer base, coupled with the revenue shortfall, signaled underlying weakness in demand and prompted the negative investor reaction despite the strong bottom-line performance.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Cable One? Access our full analysis report here.
What Is The Market Telling Us
Cable One’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 28 days ago when the stock dropped 3.3% on the news that worries over worsening trade relations with China were triggered by critical comments from President Donald Trump.
The President's comments, stating on social media that China has 'become very hostile,' have injected significant volatility into the broader markets. This has particularly affected the leisure industry, which is highly sensitive to economic sentiment and discretionary spending. Leisure stocks, which include companies in travel, entertainment, and hospitality, rely on consumers feeling confident enough to spend on non-essential goods and services. Trump targeted China's tightening controls on rare earth metals, which are vital components in many technology products from electric vehicles to defense systems. The president's tone and the suggestion of canceling a meeting with President Xi caused a rapid sell-off in the market.
Earlier in the week, China announced new export controls on the critical minerals. Beijing's Commerce Ministry stated that foreign suppliers now need government approval to export products containing certain rare-earth materials. These materials are essential for producing high-tech goods, including computer chips, electric vehicles, and defense technology. Analysts viewed the move as a strategic assertion of China's dominance in the global rare earth supply chain, particularly amid ongoing trade tensions. The prospect of escalating tariffs raises concerns about economic headwinds, which could lead to a slowdown in consumer spending. If consumers tighten their budgets in response to economic uncertainty, discretionary purchases are often the first to be cut, directly impacting the revenues of companies in this sector.
Cable One is down 64.4% since the beginning of the year, and at $130.36 per share, it is trading 69.4% below its 52-week high of $425.99 from November 2024. Investors who bought $1,000 worth of Cable One’s shares 5 years ago would now be looking at an investment worth $68.90.
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